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Employment Law Notebook

What Employees and Employers Need to Know About New Jersey’s New Equal Pay Law

If you work or employ people in New Jersey and took some much-needed vacation time in July, you might have missed the bombshell news that hit July 1 that could affect the pay and benefits of nearly every employee working in the state. That’s the date New Jersey’s new equal pay law, the Diane B. Allen Equal Pay Act, went into effect. While the federal Equal Pay Act and most other states’ laws are focused only on eliminating the pay gap between men and women, New Jersey’s new law extends to all protected classes under the New Jersey Law Against Discrimination. What this essentially means is that any employee working in New Jersey who is receiving less compensation (wages and benefits) than a similarly situated co-worker who is not in their protected class may be able to assert a discrimination claim against their employer (with limited exceptions). There is great potential for the emergence of new single, class and collective action equal pay cases, and the new law will make it harder for employers to use wide discretion in compensation decisions.

The new law, which actually amended the existing New Jersey Law Against Discrimination (“NJLAD”), will prohibit employers from paying employees performing “substantially similar work” but who are in different protected classes (race, color, creed, gender, age, disability, national origin, nationality ancestry, marital status, pregnancy, etc.) less pay and benefits unless the following exceptions are met:

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Different pay/benefits are provided due to an objective merit/evaluation system or

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Different pay/benefits are provided due to a seniority system (length of service) or

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Different pay/benefits are provided due to training, education, experience, quality or quantity of production job related requirements that are necessary for the business; or

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Different pay/benefits are provided due to other legitimate job-related requirements for the position that do not perpetuate pay/benefit differences in compensation and are not based on membership in a protected class. (Necessary for the business means there are no other factors for the employer to consider that would accomplish the business objective but not produce a discrepancy in pay/benefits).

The law does not treat the compensation that an employee earned at their last job or the cost of living in a particular location as a legitimate factor. Substantially similar work means the skills and efforts and responsibilities that are needed to get the job done and actually applied by those in the workforce. It is not determined by an employee’s job tile or job description.

The new law protects employees from retaliation when they seek, share, or discuss legal advice or information regarding employee rights under the law and greatly increases the damages available to employees bringing this type of discrimination claim under the NJLAD. In addition to the compensatory damages, attorneys’ fees, and punitive damages already available on NJLAD discrimination claims, employees with an Equal Pay claim can seek treble damages: three times the amount of the pay/benefits differential for up to a six-year period.

Given the stakes, employers need to prepare now in order to ensure they are compliant with the new requirements and to prevent litigation. Such preparation involves the following:

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Implementing an objective performance evaluation system or modifying the one in place to ensure it is objective and based on measurable factors and that performance reviews and compensation decisions are not merely based on a manager’s discretion.

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Implementing a seniority system that provides consistent increases in pay/benefits based on years of service.

Conducting a pay/benefits audit to determine the pay/benefits the company is providing to such employees across all operations. (The law does not permit an employer to differentiate pay based on work site). If the audit reveals pay discrepancies, the new law requires employers to increase the pay/benefits of the employee earning less to match that of the employee earning more. It specifically prohibits an employer from lowering the pay/benefits of the higher earning employee to comply with the law.

Given the complexities of the law, both employee and employer should contact employment counsel to get more information on the law and how it applies to their unique circumstances. If you have any questions about the new Equal Pay Law, reach out to an attorney at Meyers Fried-Grodin LLP.

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